tv Nightly Business Report PBS December 20, 2010 7:00pm-7:30pm PST
>> susie: when it comes to investing, could dividend stocks be the gift that keeps on giving? >> we expect a good 2011, but we believe it will not be until 2013 until your annual income is here it was in 2008, and in between you have to find the money to live on. >> susie: we'll get the outlook for investing in dividend stocks. you're watching "nightly business report" for monday, december 20. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
investing in dividend stocks could be where it's at. in the past week, we've seen companies including pfizer, at&t and waste management boost their quarterly dividends. those increases may be one way to attract investors who pulled out of the stock market during the financial crisis and never came back. erika miller reports. >> reporter: 1.9%. that's the measly average dividend that s&p 500 firms are paying out these days. the good news is the payouts are expected to become more generous next year. analyst howard silverblatt says that's because many companies are becoming more optimistic. >> reporter: dividends are a cash flow item, and you need to have high confidence before you commit to sending out that check. it's also because so many firms are sitting on buckets of cash. sure, some will use that money to buy other companies or to buy back their stock. but many firms will choose to reward shareholders with dividends. the dividend picture improved dramatically this year, with 255
firms increasing payouts. that's about 100 more than last year. s&p predicts that next year as many as 290 companies will boost their dividends. so which companies are most likely to initiate or increase dividends in 2011? some market pros point to firms in the consumer staples sector-- like coca-cola-- and consumer discretionary names, like target. but many tech names are also embracing dividends-- a relatively new trend. startegist michael bloch says financials-- which slashed dividends in 2009-- should be a big sector for dividend increases next year. >> they are going to have the ability to raise dividends, and that's really going to attract new investors. so, i think this is-- even though it's known and it's out there that this is going to happen, i don't think it's on everybody's radar screen. i think it's a great play for 2011. bank of america strategist david bianco says investors should focus on companies that are likely to increase their payouts to shareholders.
>> we prefer dividend growth companies over dividend yield-- the high-dividend growth sector, like utilities, telecom, even banks, although i'm bullish on them. it's the sectors that we think have the most potential to increase their dividends, technologies, industrial materials that are the most attractive. >> reporter: but it's important to keep perspective. despite the better outlook for dividend levels next year, experts say it will take until 2013 before they reach 2008 levels. that means that people who depend on dividend income will still need to supplement. erika miller, "nightly business report," new york. >> susie: so if you want to invest in dividend stocks, what are your options? here with some answers, christopher davis. he's the fund analyst at morningstar. hi, christopher. >> hi, thanks for having me. >> now you heard our report, what's been the track record on funds that are specializing in dividend stocks? >> well, recently these funds have looked a little
sluggish. they didn't rally as strongly as some other funds in the big rally last year. and this year they lagged the market by a little bit. investors have gravitated toward faster growing firms, more aggressive investments and you know dividends not aggressive so these have looked a little slow. >> all right, now i know there are a lot of choices out there, if you want to got fund route and you have three names that you are going to talk over with us that are highly rated by morningstar and they all are no loads. in other words, they have no sales fees so let's look at the first one. vanguard dividend appreciation index fund, the ticker ddaix. now what kind of stocks does this invest in. >> well, this fund is investing in stocks that are increasing their dividends. in fact in an index called the merging dividend achievers index and these companies have increased their difficult dmens each of the past ten years. and they're really financially strong companies. the cream of corporate america.
coke, pepsi, mcdonald's, procter & gamble, these household sort of names. >> all right. now you have another vanguard fund here, a vanguard dividend growth ticker vdigx. how is this different from the first fund you just told us about? >> well, the big difference is it is actively managed it means there is somebody there pick the stocks. that makes it more expensive but this fund has a longer track record it is actually better than the index fund. and it invests more heavily in even larger sorts of companies and those have been most out of favor and so i think that going forward maybe not 2011 but in the years ahead, this fund might even have better prospects. >> let's look at your final choice. alliance nfj dividend value. the ticker symbol there, peidx watch. is the story here? >> well, this fund is investing in companies that have been really out of favor. you mentioned in the report
pfizer as one example that this fund is investing in, so it has a higher, much higher dividend yield than the market as a whole. so this fund has the highest dividend yield of the three. and so i think it's a better choice for income oriented investors. especially if they are looking to fill out let's say the value portion of their portfolio. >> real quickly we have a few seconds left. any advice to investors. they might think that you get into a stock fund that pays dividends, they are going to get a lot of income. any warnings? >> yeah, not necessarily. but i think that investors should necessarily-- income. sometimes companies that pay a lot of income aren't great companies. investors don't like them for a reason and so you might be investing in something that's going to eventually run into trouble. so i would invest in funds that are run by experienced managers, great long-term records and invest in companies that have proven financial stability.
>> okay, all right, always the same thing. you have to do your research first. thank you so much for coming on the program. >> all right, thank you for having me. >> we have been speaking with christopher davis of morningstar. >> susie: here are the stories in tonight's n.b.r. newswheel: stocks closed mixed on the first day of this shortened holiday week. the dow lost nearly 14 points, the nasdaq rose 6.5 and the s&p 500 added three.
trading volume fell sharply from friday's quadruple witching. 829 million shares moved on the n.y.s.e., 1.7 billion on the nasdaq. new york's attorney general and governor elect, andrew cuomo, is reportedly close to filing civil fraud charges against ernst and young. according to the "wall street journal," prosecutors say the firm stood by while lehman brothers misled investors about its financial health. charges are expected to be filed this week, making ernst and young their first major accounting firm targeted for its role in the financial crisis. wells fargo has agreed to provide home loan modifications worth more than $2 billion to nearly 15,000 california residents. the deal applies to high-risk mortgages called "pick-and-pay loans." the bank will also contribute $32 million to california so the state can pay restitution to homeowners who lost their homes to foreclosure. and moody's investors service
may downgrade 30 spanish banks. the warning from the ratings firm comes less than a week after moody's said that it may downgrade ratings on spanish government debt. many spanish banks helped to finance a construction boom that went bust. >> this is diane eastabrook at the u.s. post office in chicago, where the bad economy is bringing out the santa in a lot of people. >> susie: many medical schools and teaching hospitals have new policies to put your interests first. those rules ban faculty members from serving as paid speakers for drug products. a new investigation by the independent newsroom propublica found those policies look good on paper, but don't always work in practice. tonight darren gersh continues our "dollars for doctors" coverage, with an ongoing examination of the monetary ties between drug companies and your doctor. >> reporter: they are some of the most prestigious medical schools in the country.
stanford university. the university of pennsylvania. the university of pittsburgh. the university of colorado denver. but reporters at the independent newsroom propublica found dozens of faculty members at these schools were accepting payments to speak on behalf of drug companies, an apparent violation of university policies banning the practice. the names were found by searching a new database developed by propublica, which tracks payments to doctors from some of the nation's largest drug companies. >> at stanford we identified more than a dozen doctors who were giving drug industry talks, and stanford's policy is very clear on banning that sort of thing. >> reporter: propublica's charles ornstein says the violations at stanford are surprising, given that the university has taken the lead in restricting drug company sales reps on its campus and put in place a ban on speaker's programs last year. >> we're not talking about $1,000 or $2,000. >> reporter: one of the doctors was the vice chair of the
medicine department, and he brought in more than $50,000 speaking on behalf of eli lilly. then there were two doctors who each took in more than $100,000 in their speeches. >> reporter: in an email to faculty, stanford dean philip pizzo called the conduct unacceptable. >> we simply don't believe, do not advocate for, or affirm in any way that physicians, particularly on our faculty, should be involved in marketing for industry. >> reporter: pizzo says there's no question some faculty violated stanford policy, and he says the university is evaluating what the consequences should be. >> across the board, everyone who has seen their names on the list has been very, very remorseful and very apologetic. didn't realize that they were violating the policy and very quick to say that they were going to be ceasing and desisting going forward. that's important. that's how change occurs. >> reporter: the association of american medical colleges advises its members to ban drug- company sponsored talks.
but its president, dr. darrell kirch, says the group doesn't have the power to monitor enforcement of those policies. >> have we attained the degree of adherence we want? not yet. but we're moving much more quickly than i and others thought we might be able to given the complexity of the national health care system. >> reporter: for some medical schools, the key issue is not how much drug companies pay faculty to speak, but how much control the professor has over his or her presentation. in response to federal lawsuits charging illegal marketing, drug companies have gotten much stricter, requiring speakers to stick to carefully crafted company-provided slides. but critics told propublica in the academic world, that's like using someone else's work. >> and here you are teaching students not to take other people's work, but yet, at the same time, you're using somebody else's slides to make a presentation, and they see sort of an inherent disconnect in
that. >> reporter: medical schools argue they are striking a balance: banning drug company marketing while encouraging industry to bring discoveries that begin here to the patients who need them here. >> we want those kinds of connections to occur. we can't, as a university, bring things to the public good in terms of products. we can develop ideas that others can work on to develop further. what we don't want to do is use our name and reputation to serve as the marketing for industry. >> reporter: but critics of drug company practices say medical schools that want to protect their reputations will have to rely less on the honor system if they want to make sure some faculty member names don't pop up on a database like this. >> and this is sort of the quintessential surprise when you discover somebody on a list you didn't know about. >> reporter: tomorrow we'll learn why medical students are grading their own schools and changing the relationship between doctors and industry in
the process. darren gersh, "nightly business report," washington. >> susie: a choppy day of trading in the markets today. investors seem to be thinking ahead to 2011 on this holiday- shortened trading week. stocks drifted between gains and losses. let's take a look in tonight's "market focus." energy stocks and financials dominated trading today. here are the sector leaders: there you see energy up 0.7%, consumer discretionaries rose 0.6% and the financials gained 0.4% and that advance in financials came despite a downgrade in shares of american express. there you see amex down $1.51, or about 3.5%. stifel nicholaus, the brokerage firm, cutting a-x-p from "buy" to "hold."
it thinks among the big credit card companies, amex stands to lose the most from the new credit and debit card processing rules issued by the fed last week. fellow dow component boeing also losing ground today. the "seattle times" reported over the weekend that the 787 dreamliner could be pushed back by as much as another six months, but boeing would not confirm that. looking at a chart of boeing stock, shares down almost 3% percent today, but still up over 16% on the year. another defense contractor raytheon is expanding its reconnaissance products. it's buying applied signal for almost $0.5 billion, or $38. that bid pushed shares of applied signal sharply higher, up 8%. meanwhile, raytheon stock pulled back a bit. the other big deal of the day? at&t is buying wireless spectrum licenses from qualcomm. the price tag? nearly $2 billion.
with those additional wireless licenses, at&t will reach more customers and expand its 4g wireless broadband service. a different story at k.k.r. its deal with an australian wealth manager was scrapped. the company, called perpetual, called off takeover talks with kohlberg kravis roberts. k-k-r was offering roughly $1.7 billion for perpetual, an offer many saw as undervalued. on the news, k-k-r shares up 1.5% to $13.57. let's get back to energy, coal stocks heated up today thanks to a positive recommendation from f.b.r. it upped several coal stocks from "market perform" to "outperform," calling them "a long-term idea for patient investors." and patriot led the gains. as you see, up 7%, followed by consol energy, a gain there of
3%, and cloud peak energy up almost 3%. well, it was another day of gains at chesapeake energy. it was up $2.06, or 9%, thanks to a two-year high in nat gas prices, and news last week that billionaire investor carl icahn now has a stake of almost 6% of the stock. jefferies and company today said it would be good if icahn can convince chesapeake to end its recent land-buying spree. a lot of action after the bell, adobe systems reporting its first billion-dollar quarter for sales. adobe earned 56 cents a share in its fourth quarter, 4 cents better than estimates. revenues also came in better than expected, up 33% to $1 billion. adobe shares going into tonight's report at $29.18 a share. but it moved as much as 8% above these levels in after-hours trading. and finally, investors were hungry for shares of darden restaurants, the owner of the
red lobster and olive garden chains. susquehana financial raised its price target to $58 a share, up from $49. the stock closed up 54 cents to $50.43 ahead of its quarterly earnings news. then after the bell, darden posted earnings of 54 cents per share, meeting estimates, but the stock fell from these levels on weakness in sales at darden's red lobster chain. and that's tonight's "market focus."
>> susie: it's being called the "flight-mare before christmas." snow and freezing temperatures have brought london's heathrow airport to a near standstill. it's the world's busiest international airport, and repercussions of the flight delays are being felt around the world. 400,000 people were expected to catch a flight at heathrow in the past few days. very few actually did. just days before christmas, the backup couldn't come at a worse time. analysts say british airways is losing up to $15 million a day because of the major disruptions. here's what we're watching for tomorrow: the first set of results from the 2010 census will be released. we'll see quarterly earnings from carmax and conagra foods. and the f.c.c.plans a vote on net neutrality rules. also tomorrow, our "word on the street" is "technology". bob walberg from thestreet.com will tell us the technology stocks to own in 2011.
expect gasoline prices to hover around $3 a gallon for the next few months. experts predict high prices until february. the reason? the rising cost of crude oil. it's traded between $83 and $89 a barrel since thanksgiving. the average american household will spend about $305 on gasoline this month, according to a new study from business management firm portia group. that's up almost 14% from last december and 76% more than december of 2008. >> susie: your neighborhood blockbuster video could soon be closed out. the video rental chain plans to shut down 72 stores by january first, and 110 more in the first quarter of next year. blockbuster filed for bankruptcy in september. it was weighed down by debts and hurt by competitors like netflix and redbox. when blockbuster emerges from
bankruptcy, billionaire investor carl icahn and his hedge fund partners will be in control of the company. and finally, in this tough economy, even santa could use a little help during the holidays. and luckily for him, many people are in the giving spirit. take chicago for example. every year the u.s. post office there asks the public to help santa provide gifts to needy kids. but as diane eastabrook reports, this year children aren't the only ones writing to santa.
>> here you go, merry christmas. >> reporter: this is the santa most of us know. but isabella chiov ari is santa too. she's playing st. nick for two little girls she doesn't even know. >> i just bought them some clothes and pajamas, and some toys-- you know, something fun. >> reporter: every christmas, the chicago post office invites the public to respond to thousands of letters to santa from needy kids. but this year, many of the letters are from adults who've lost jobs and are seeking help for their children. maureen shanahan and her mom picked out one such letter. >> mario is developmentally delayed. the situation has made things hard. i've been unable to work. >> we thought we would come over and get a letter and see what we could do to make someone's christmas really great. >> reporter: post office spokesman mark reynolds says many letters request basics like food, clothing and maybe an inexpensive toy. >> they're not the kids asking "hey, santa i want an xbox." they're moms and dads asking "hey, santa, can you get my kids something for christmas, because
they've been really good, but i can't afford it." >> reporter: playing santa requires boxing up the gifts... getting them weighed for the proper postage... then carting them back to another area that handles the gifts. for jorge bidles, who's the father of two, it's worth the effort. >> this is my first time, and i'm going to keep doing it every year. >> reporter: by the end of this week, operation santa could spread a little holiday cheer to nearly 11,000 chicago families. diane eastabrook, "nightly business report," chicago. >> susie: for more on tonight's stories, you can go to our website. it's n.b.r. on pbs.org. and, hilary kramer is back as our "street critique" guest on wednesday. so, if you have questions for her, email us at firstname.lastname@example.org. you can also send us a note via twitter and on facebook. well feature some of your questions this week. that's "nightly business report" for monday, december 20. i'm susie gharib. good night everyone.